Bond investors stick to neutral stance ahead of Fed meeting

Written by Gertrude Chavez-Widivos

New York (Reuters)-Investors in games take a neutral position in the period before the two-day monetary policy meeting of the Federal Reserve this week, reflecting the constant choice of US trade policy that threatens to collect the world’s largest economy in stagnation.

Investors with fixed income said that they are either neutral in relation to their standards, which reduces their long -term exposure, or prefer to stay at the shortest end of the return curve.

“We are somewhat in this unstable balance between increasing economic concerns as we see a little soft data, but also the possibility of political shocks that may affect inflation and disability expectations,” said Chib Higge, the managing director of fixed income in Richmond’s advisory services. Virginia.

To be neutral means sticking to the standard of the preservative. For example, if the standard period is five years, the neutral position indicates staying in the assets with fixed income with a five -year entitlement or around this vicinity.

The period, which is expressed in a number of years, provides an indication of a decrease in the value of bonds or increases when interest rates move. In general, when the rates decrease, high -term bonds face an increase in value compared to those who have a lower period.

Investors have extended most of the year 2024, believing at the time that the Federal Reserve will start a deep rate of cutting. Long -term bets usually include purchase of long repetitive assets on low return expectations.

On Wednesday, the Federal Policy Committee at the Central Bank of the United States will maintain the night level rate in the range of 4.25 % -4.50 %. It also gave strong salary data from the unexpected United States in April last Friday some deadline to maintain rates unchanged.

Since the last federal reserve meeting in March, the administration of president Donald Trump has made a huge commercial shock that has witnessed the high prices of customs tariffs, especially on Chinese goods.

This increased the sale of the US Treasury, which, at some point, led the reference for 10 years more than 70 basis points (BPS) to nearly 4.6 % during the period from 3 to 11 April. The return in the United States is currently 10 years at 4.357 %.

At his press conference after preparation on Wednesday, Federal Reserve Chairman Jerome Powell is likely to indicate that the shock of Trump’s tariff may lead to an increase in enlargement and an increase in unemployment, with the recession is not a long -standing scenario.

There is no preventive step

“It is unlikely that the Federal Reserve is proactive, given its expectation that inflation will succeed and that the size of the trauma of customs tariffs may result in continuous inflated effects,” said analysts in Morgan Stanley, led by senior American economists, in a research note.